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Learn to do your maths

Before you get into actual investing,be sure to put down your expectations aboutpossible ROI ( return of investment ). And most importantly, learn to do it right. I was just asking about the possibility of making 3% of your capital per day in one forum. The answer was that it’s not really possible with stocks. I claimed that 2%...how is it not possible – lets say you have $100k to play with, you make 10 trades per day, you manage to make 7 trades out of 10 winning ones. Each trade in average makes you 0.5%. 7*0.5% = 3.5% and 3 losing trades – 3*0.5%=1.5%. Total 2% ROI per day, considering the average on both winning and losing trades is 0.5%.

Everything seems to be right...right? No. Think again. That’s far from the truth. This can only happen if with every trade you use your whole capital which never is a good idea. As this means you’re risking 100% of your capital with every stock you buy.

Instead, lets get more realistic. Ideally you divide your capital between 10 different stocks, so in this case $10k for each stock. You win with 7 of them and lose with 3 of them. 0.5% of $10k is $50. Seven times $50 is $350. Lets now take off the loss of $150 and we get to the total of $200. And this is not 2% ROI anymore but rather 0.2%. Notice the difference? It’s all very logical but these are the very simples mistakes each of us can make without much thinking. Lets make sure you and me won’t do the same mistakes again.

Note though but with forex things can be a bit different thanks to the 1:100 leverage. But here you also must consider the higher risks.